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Chapter 2Sources of Complexity

Complex organizations are a result of complex business strategies. But not all complexity is equal. Frans van Houten, CEO of Royal Philips, makes a case for distinguishing between what he calls rewarded and unrewarded complexity. Rewarded complexity drives a multifaceted growth strategy through a network of value-adding contact points across diverse teams, functions, and business units around the world. A well-designed organization structure brings management attention to the nodes where value and capabilities are created—the intersection of customers, brands, products, emerging markets, functional expertise, and other strategic choices.

Often, rewarded complexity is a result of making things simpler or more ...

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